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The rise of middle class


                                  Satya MAHESH, India



17th April 2012, London
Disclaimer


   The views expressed in this message are made in an
   individual capacity and do not necessarily reflect those of
   Sanofi (the “company”) or any of its affiliates. Neither the
   company nor any of its affiliates assumes any responsibility
   or liability of any use which may be made of any views
   expressed here in.
Change is a Cliché




                     3
but ,the Speed of Change is not…




                         5 Million Years                               250 Years
5 Mio years ago the first modern humans appeared / 500,000 years ago - Homo sapiens / 50,000
years ago agriculture started / 5,000 years ago moved into towns and cities./ 500 years ago :
Industrial revolution or mass production (Printing Press) – 30 years ago Information Age
Each era lasted for one tenth of previous era !!!
Future - not a linear
extrapolation of the past


Trends may
show the path



      Image from FMSI web site (Financial Management solutions Inc)
Increase of population
Increase of population
 under democracies
 under democracies


More hands to earn..
fewer mouths to feed


Money begets money
Vicious to Virtuous
The Indian ‘Palmystery’

   Health

   Wealth

   Happiness
A dash of stats…



          Health     Population




                   Wealth
                                  Gapminder
Wealth to Health or Vice Versa?




                                  Gapminder
Wealth to Health or Vice Versa?




                                  Gapminder
State of nations




                   Gapminder
Individually poor – Collectively middle class




  Individually middle class – Collectively Rich
                                                  Gapminder
Exercises more consumer
      rights than civil rights

    Pay cheque to pay cheque



    Education, family house,
    Manager or Professional

        White collar Job



Who are middle class ?
Ask ten economists , get eleven answers


             Absolute        Relative
          Earning       Consumption
            Individual      Household



                              Define the purpose
Per Capita earning of $2 - $ 13 / Day Ravallion




                                                                             Earning
Per capita earning of $10 - $ 20 / Day World Bank

Per capita earning of $16 - $80 / Day Goldman sachs

includes those earning more than $10 a day, but excludes those in
the top 5 percent of the income distribution Birdsall (2010)



                   $2 and $10 per person per day consumption Banerjee and Duflo (2007)
     Consumption




                   1/3 of income left for discretionary spendingn Dilip K. Das

                   Income interval from 75% to 125% of the median Thurow (1987)

                   $5K - $15K Disposable Income/ Yr Euromonitor

                   who could routinely buy items sold at a typical Western-type discount
                   store Miller-McCune ( 2008)
Is this the BRICs Decade ? Gold man Sachs Publication May ,2010
Poor                   Middle Class                       Rich

 Money                    To be used               To be managed                 To be invested


 Food                      Quantity                     Quality                   Presentation


 Time                       Present                      Future              Traditions and History


                                                                                 Imp for making
 Education           Valued and Revered                  Crucial                  connections

 Driving           Survival, Relationships            Work &                  Financial , Political &
 Forces               & Entertainment               Achievement                Social connections



Ruby Payne, A Framework for Understanding Poverty, Highlands, TX: aha! Process, Inc.,1996 pp. 42 - 43
Leapfrog the paths

Can differentiate cheap..
Economical and premium

Guarded…Saving


Modern yet ,traditional
!ndia

         Shifting brahminical restraint


         3Cs: Cable TV ,Cinema & Cricket

         More mobiles than toilets
         (not just mobile..FM,Calc,time)


         Middle Class Car Tata Nano?


Time Cover Photo by Arthur Hochstein. Woman by hill street studios-getty images blend collection
Global Middle Class
               MC Population in Mios          2009     2020     2030     2009 2020 2030
Middle class

               Asia Pacific                     525     1,740    3,228   28% 54% 66%
Population

               Europe                           664       703      680   36% 22% 14%
               North America                    338       333      322   18% 10% 7%
               Central and South America        181       251      313   10% 8% 6%
               Middle east and North Africa     105       165      234   6% 5% 5%
               Sub -Saharan Africa               32        57      107   2% 2% 2%
               World                           1,845    3,249    4,884   100% 100% 100%


               Mio of 2005 PPP $              2009     2020     2030     2009 2020 2030
Middle class




               Asia Pacific                    4,952   14,798   32,596   23% 42% 59%
 Spending




               Europe                          8,138   10,301   11,337   38% 29% 20%
               North America                   5,602    5,863    5,837   26% 17% 10%
               Central and South America       1,534    2,315    3,117   7% 7% 6%
               Middle east and North Africa      796    1,321    1,966   4% 4% 4%
               Sub -Saharan Africa               256      448      827   1% 1% 1%
               World                          21,278   35,046   55,680   100% 100% 100%
Future : Wave of Consumption




             The emerging middle class in developing countries : Homi Kharas
Medicine and middle class
Disease does not discriminate


Awareness and Affordability


Individual Income Vs. Family Income
Near dry pipe lines

Price pressures even in mature markets

Few innovative mols. Vs. Essential drugs
is middle
Good enough?
The next 4 Billion : GEM




     Growing Emerging Middle
Urban - Rural divide of GEMs

   Middle Class                  GEM

      74% of       Urban         41% of
    Population                 Population



      26% of        Rural       59 % of
    Population                 Population
Strategic imperatives….




            Value         Volume
            Urban         Rural
           Life Style      Life
What organizations can do?

  Play across tiers and SE Strata
                                      Interdependent
  High Quality – Low Cost           Socially sustainable
                                     Business models
  Ideal Admixture

  Many small Vs few Big brands             Share
                                       Opportunities
  Volumes will bring Values         , costs and profits
Improve Trust




2012 Edelman trust barometer
Individual and references & Image Credits

       My Wife, Syamala and
       My collegues M/S Amlesh Ranjan , Venkatesan Subramanian
        and Parthasarathy
       Marcus evans and Sponsors Bio Portfolio

       Gapminder
       Photographs from various unknown artists, CIA Fact book
       Profitable growth strategies for the Global Emerging Middle
        by PWC
       The emerging middle class in developing countries : Homi
        Kharas
       2012 Edelman trust barometer
       Many more references books , articles from Google search
ThanQ


ksatyamahesh@gmail.com
www.LCDing.com
+91 9819 62 01 62
Backup
GDP BRICs




CIA World Fact Book
Population Dynamics




CIA World Fact Book
Healthcare in BRICs




CIA World Fact Book
Middle Class Ethos : Brazil


                              Relationships


                              Diverse n Multi ethnic


                              Individual Loyalty


                              Hierarchy
Middle Class Ethos : Russia

   Independent


   Russian and Non Russian


   Intellect


   Adherence to Order


   Community over Individual
Middle Class Ethos : India

                             Knowledge for Money


                             Spirituality and Modesty


                             Joint Families and Loyalty


                             Hierarchy


                             Jugad
Middle Class Ethos : China

   Family : Valued


   Society over Individual


  Relationships and Reciprocity


   Hierarchy : Patriarch


   Morality in life: Confucius
Brazil : Health and Wealth last 200 Years
Russia : Health and Wealth last 200 Years
India : Health and Wealth last 200 Years
China : Health and Wealth last 200 Years
End of the presentation

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Rise of Middle Class

  • 1. The rise of middle class Satya MAHESH, India 17th April 2012, London
  • 2. Disclaimer The views expressed in this message are made in an individual capacity and do not necessarily reflect those of Sanofi (the “company”) or any of its affiliates. Neither the company nor any of its affiliates assumes any responsibility or liability of any use which may be made of any views expressed here in.
  • 3. Change is a Cliché 3
  • 4. but ,the Speed of Change is not… 5 Million Years 250 Years 5 Mio years ago the first modern humans appeared / 500,000 years ago - Homo sapiens / 50,000 years ago agriculture started / 5,000 years ago moved into towns and cities./ 500 years ago : Industrial revolution or mass production (Printing Press) – 30 years ago Information Age Each era lasted for one tenth of previous era !!!
  • 5. Future - not a linear extrapolation of the past Trends may show the path Image from FMSI web site (Financial Management solutions Inc)
  • 6. Increase of population Increase of population under democracies under democracies More hands to earn.. fewer mouths to feed Money begets money Vicious to Virtuous
  • 7. The Indian ‘Palmystery’ Health Wealth Happiness
  • 8. A dash of stats… Health Population Wealth Gapminder
  • 9. Wealth to Health or Vice Versa? Gapminder
  • 10. Wealth to Health or Vice Versa? Gapminder
  • 11. State of nations Gapminder
  • 12.
  • 13. Individually poor – Collectively middle class Individually middle class – Collectively Rich Gapminder
  • 14. Exercises more consumer rights than civil rights Pay cheque to pay cheque Education, family house, Manager or Professional White collar Job Who are middle class ?
  • 15. Ask ten economists , get eleven answers Absolute Relative Earning Consumption Individual Household Define the purpose
  • 16. Per Capita earning of $2 - $ 13 / Day Ravallion Earning Per capita earning of $10 - $ 20 / Day World Bank Per capita earning of $16 - $80 / Day Goldman sachs includes those earning more than $10 a day, but excludes those in the top 5 percent of the income distribution Birdsall (2010) $2 and $10 per person per day consumption Banerjee and Duflo (2007) Consumption 1/3 of income left for discretionary spendingn Dilip K. Das Income interval from 75% to 125% of the median Thurow (1987) $5K - $15K Disposable Income/ Yr Euromonitor who could routinely buy items sold at a typical Western-type discount store Miller-McCune ( 2008)
  • 17. Is this the BRICs Decade ? Gold man Sachs Publication May ,2010
  • 18. Poor Middle Class Rich Money To be used To be managed To be invested Food Quantity Quality Presentation Time Present Future Traditions and History Imp for making Education Valued and Revered Crucial connections Driving Survival, Relationships Work & Financial , Political & Forces & Entertainment Achievement Social connections Ruby Payne, A Framework for Understanding Poverty, Highlands, TX: aha! Process, Inc.,1996 pp. 42 - 43
  • 19. Leapfrog the paths Can differentiate cheap.. Economical and premium Guarded…Saving Modern yet ,traditional
  • 20. !ndia Shifting brahminical restraint 3Cs: Cable TV ,Cinema & Cricket More mobiles than toilets (not just mobile..FM,Calc,time) Middle Class Car Tata Nano? Time Cover Photo by Arthur Hochstein. Woman by hill street studios-getty images blend collection
  • 21. Global Middle Class MC Population in Mios 2009 2020 2030 2009 2020 2030 Middle class Asia Pacific 525 1,740 3,228 28% 54% 66% Population Europe 664 703 680 36% 22% 14% North America 338 333 322 18% 10% 7% Central and South America 181 251 313 10% 8% 6% Middle east and North Africa 105 165 234 6% 5% 5% Sub -Saharan Africa 32 57 107 2% 2% 2% World 1,845 3,249 4,884 100% 100% 100% Mio of 2005 PPP $ 2009 2020 2030 2009 2020 2030 Middle class Asia Pacific 4,952 14,798 32,596 23% 42% 59% Spending Europe 8,138 10,301 11,337 38% 29% 20% North America 5,602 5,863 5,837 26% 17% 10% Central and South America 1,534 2,315 3,117 7% 7% 6% Middle east and North Africa 796 1,321 1,966 4% 4% 4% Sub -Saharan Africa 256 448 827 1% 1% 1% World 21,278 35,046 55,680 100% 100% 100%
  • 22. Future : Wave of Consumption The emerging middle class in developing countries : Homi Kharas
  • 24. Disease does not discriminate Awareness and Affordability Individual Income Vs. Family Income
  • 25. Near dry pipe lines Price pressures even in mature markets Few innovative mols. Vs. Essential drugs
  • 27. The next 4 Billion : GEM Growing Emerging Middle
  • 28. Urban - Rural divide of GEMs Middle Class GEM 74% of Urban 41% of Population Population 26% of Rural 59 % of Population Population
  • 29. Strategic imperatives…. Value Volume Urban Rural Life Style Life
  • 30. What organizations can do? Play across tiers and SE Strata Interdependent High Quality – Low Cost Socially sustainable Business models Ideal Admixture Many small Vs few Big brands Share Opportunities Volumes will bring Values , costs and profits
  • 31. Improve Trust 2012 Edelman trust barometer
  • 32. Individual and references & Image Credits  My Wife, Syamala and  My collegues M/S Amlesh Ranjan , Venkatesan Subramanian and Parthasarathy  Marcus evans and Sponsors Bio Portfolio  Gapminder  Photographs from various unknown artists, CIA Fact book  Profitable growth strategies for the Global Emerging Middle by PWC  The emerging middle class in developing countries : Homi Kharas  2012 Edelman trust barometer  Many more references books , articles from Google search
  • 35. GDP BRICs CIA World Fact Book
  • 37. Healthcare in BRICs CIA World Fact Book
  • 38. Middle Class Ethos : Brazil Relationships Diverse n Multi ethnic Individual Loyalty Hierarchy
  • 39. Middle Class Ethos : Russia Independent Russian and Non Russian Intellect Adherence to Order Community over Individual
  • 40. Middle Class Ethos : India Knowledge for Money Spirituality and Modesty Joint Families and Loyalty Hierarchy Jugad
  • 41. Middle Class Ethos : China Family : Valued Society over Individual Relationships and Reciprocity Hierarchy : Patriarch Morality in life: Confucius
  • 42. Brazil : Health and Wealth last 200 Years
  • 43. Russia : Health and Wealth last 200 Years
  • 44. India : Health and Wealth last 200 Years
  • 45. China : Health and Wealth last 200 Years
  • 46. End of the presentation